The effect of oil prices on macroeconomic indicators: The case of Turkey

Energy is one of the main inputs used in production. While the energy source used with the industrial revolution was coal, energy sources such as oil, natural gas and electricity began to be used in time and became indispensable. With the oil crisis in 1973, it was understood how important energy was. With the increase in oil prices, the economies of countries that are dependent on foreign oil have been adversely affected. The increase in the prices of oil, which is an important input in production, decreases the output level, causes cost inflation and affects the economy in general negatively. In countries that import oil, it causes an increase in costs and a decrease in competitiveness in international trade, thus negatively affecting the balance of payments. The aim of this study was to examine the relationship between macroeconomic indicators and the price of oil in Turkey. In this direction, cointegration and causality analysis were conducted in EVİEWS 10 econometrics program. In our study in Turkey, 2003:Q1-2019:Q4 periods of oil prices and economic growth, unemployment, inflation, import, export and exchange rate relations between were investigated. Brent oil prices are independent variables, economic growth, unemployment, exports, imports, inflation and exchange rate dependent variable. According to the findings, it is concluded that there is a long-term cointegration relationship between oil prices and economic growth, exports and inflation, while no relationship has been found between oil prices and unemployment, import and exchange rate. With the causality tests conducted, it was concluded that there is one-way causality from oil prices to exports and imports, and that there is one-way causality from economic growth to oil prices, while the causality between oil prices and inflation, unemployment and exchange rate has not been found.